Unauthorized fees or 'cramming' shifts from landline phones to mobile

FILE - In this March 2, 2010 file photo, an unidentified man talks on his cell phone in Augusta, Maine. When a mysterious, unauthorized fee appears on your cellphone bill, it's called "cramming" and consumer advocates and regulators worry it's emerging as a significant problem as people increasingly ditch their landlines for wireless phones. (AP Photo/Pat Wellenbach, File)

WASHINGTON -- When a mysterious, unauthorized fee appears on your cellphone bill, it's called "cramming" and consumer advocates and regulators worry it's emerging as a significant problem as people increasingly ditch their landlines for wireless phones.

The cramming fee is bogus and usually small, under $10 a month. It might be listed on your bill as a "premium service" or other generic-sounding charge. Cramming had long been a problem with traditional landline phones, but after pressure from lawmakers, regulators and others, some of the largest landline carriers last year said they would no longer allow third-party billing -- where an outside company offers and then charges the landline customer for services like third-party email, faxing, and voicemail.

Now, the focus of concern is shifting to wireless phones and cramming.

"As people continue to use mobile phones as a payment option, this problem is likely to grow," says Malini Mithal, an assistant director in the financial practices division at the Federal Trade Commission. "It's just a new opportunity for fraudsters."

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The commission held a daylong conference on the issue Wednesday with consumer advocates, wireless carrier representatives, and state and federal officials. The meeting came just weeks after the FTC lodged its first mobile cramming case, accusing a Georgia-based company, Wise Media, of bilking consumers out of millions of dollars for text messages with horoscopes, flirting tips and other information.

According to the agency, consumers across the country were signed up randomly for text services from Wise Media and charged $9.99 a month on their mobile bills, without their knowledge or permission. The text messages suggested people had subscribed to the service, but many consumers dismissed the texts as spam. People who responded and said they didn't want the service were charged anyway, the agency said.

The wireless industry says the Wise Media case isn't the norm and mobile carriers are closely vetting third-party vendors who offer services for ringtones and other products and then have charges placed on consumers' mobile bills.

"We have not seen a spike or trend in complaints to the agencies that reflects that this is a growing problem," said Michael Altschul, senior vice president and general counsel at CTIA-The Wireless Association, the main trade group for cellphone companies.

Altschul said the mobile carriers not only monitor who is placing charges on their bills, they also require consumers to verify any premium messaging services with a second text to confirm the charge is allowed. Even so, the commission and others are pressing wireless carriers to offer consumers the option to block third-party billing as a way to prevent cramming charges.

The FTC didn't have recent figures on the number of complaints from consumers about mobile cramming. But Kate Whelley McCabe, an assistant attorney general at the Vermont attorney general's office, says cramming complaints are often underreported anyway. She said many consumers don't even know these charges are appearing on their bills.

McCabe released a study at the FTC workshop showing that of the 802 consumers who returned surveys in Vermont, 60 percent reported that the third-party charges on their mobile telephone bills were unauthorized. More than 55 percent of the respondents also reported that they were not aware of any of the third-party charges until they were asked to review their bills. Nearly 80 percent said that prior to the survey, they were not aware that companies other than their telephone company could bill them for products and services on their mobile phone bills.

Not all third-party charges that might appear on a consumer's cell phone bill are fraudulent, however.

Charities often use message texts as a way to raise money by allowing consumers to use their mobile device to text a donation for storm relief, vaccinating children or other causes. Regulators on Wednesday did not raise concerns about charity texting, but instead focused on commercial messaging services.